CITIC Securities: North American cloud providers' capital expenditure continues to grow rapidly; pay attention to undervalued computing power and high-dividend targets

According to Financial Associated Press APP, CITIC Securities has released a research report stating that, in Q2 2026, North America's leading cloud service providers will continue to see strong growth in capital expenditure. The total capex guidance for the four major North American cloud companies for 2026 is approximately $720 to $745 billion, reflecting their ongoing expansion around AI infrastructure.

Currently, the AI computing power industry chain remains highly prosperous, but the market has recently seen a significant correction, resulting in potential oversold conditions. Going forward, it is recommended to continually monitor: 1) The ARR of large models, especially the growth of ARR in Coding scenarios, since recent price reductions and promotions by North American large models may create short-term bottlenecks in ARR growth, potentially affecting market expectations for future computing power demand; 2) The deployment and development of large models in application scenarios outside of Coding; 3) The price trends of the computing power inflation chain in the coming period; and 4) The financing conditions and market risk preference across various segments of the AI industry chain.

In addition, considering the heavy AI industry chain holdings in the second quarter and recent market adjustments, with signs of rotation between high and low valuation stocks, it is suggested to focus on undervalued, high-dividend targets.

CITIC Securities' main viewpoints are as follows:

In Q2 2026, North America's leading cloud service providers will continue to ramp up capex, with quarterly expenditures of approximately $54.2 billion for AWS, $41.0 billion for Microsoft (MSFT.US), $44.9 billion for Google (GOOGL.US), and $31.1 billion for Meta. The total is $171.2 billion, maintaining rapid sequential and year-on-year growth.

For the full year, Amazon's total capex guidance is about $220 billion, further up from around $200 billion previously planned. Microsoft's guidance is approximately $175 billion for the calendar year 2026; disclosure standards have been adjusted as some data center leases are now classified as operating rather than financing leases. Alphabet's capex is between $195 and $205 billion, with a midpoint of $200 billion. Meta's capex is about $130 to $145 billion, midpoint $137.5 billion, including principal repayments for financing leases. Throughout 2026, the total capex guidance for the four major North American cloud companies is approximately $720 to $745 billion, with a midpoint of about $732.5 billion—an obvious increase over the Q1 guidance midpoint of $710 billion. This reflects ongoing major expansion around AI servers, GPU clusters, data centers, as well as power and network infrastructure among North American cloud giants, with AI infrastructure construction still in full swing.

In Q2 2026, revenue from cloud and AI-related businesses among North America's leading cloud companies continued strong growth: AWS, Microsoft Intelligent Cloud, and Google Cloud reported revenues of $42.2 billion, $39.3 billion, and $24.8 billion, up around 37%, 32%, and 82% year-on-year, respectively, with a combined total of about $106.3 billion—a 43% year-on-year and about 15% sequential increase. Notably, AWS saw its fastest growth rate in nearly 18 quarters, with annualized AI business revenue exceeding $25 billion and maintaining triple-digit growth. Microsoft's broader Microsoft Cloud revenue reached $59.3 billion, up 27% year-on-year; Azure and related cloud services grew 43%. Google Cloud experienced a notable acceleration in revenue growth, driven by GCP, AI solutions, AI infrastructure, and TPU system sales. Meta's total Q2 revenue was $60.8 billion, up 28% year-on-year, of which advertising revenue was $59.4 billion, an increase of 27%, indicating that its current AI investments are being monetized indirectly through improved recommendation algorithms, advertising efficiency, and user interactions. Overall, North American cloud companies are seeing AI revenue growth evolve from computing power rentals to model services, enterprise AI applications, and advertising efficiency gains, with robust revenue growth fundamentally supporting expanding capex.

Currently, the AI computing power industry remains buoyant, though the market has recently shown a clear correction and some oversold conditions. Moving forward, it is advised to closely monitor: 1) The ARR of large models, particularly in Coding scenarios, since North American large model providers recently cut prices, and any short-term ARR growth bottleneck could affect market expectations for future computing power demand; 2) Large model application development and deployment in scenarios beyond Coding; 3) The trend of computing power inflation chain prices in the near future; 4) Financing and market risk preference across the AI industry chain.

Moreover, given heavy sector holdings of the AI industry chain in the second quarter, recent market adjustments, and signs of sector rotation, it is recommended to focus on undervalued, high-dividend targets.

Risk Warning

Changes in the international environment may affect the security and stability of the supply chain and impact the pace of overseas expansion of related companies; tariff impacts may exceed expectations; the AI industry may grow slower than expected, impacting demand for cloud computing industry chain companies; intensified market competition could cause profit margins to decline rapidly; currency fluctuations may affect the foreign exchange income and profit margins of export-oriented companies, including those in ICT equipment and optical module/device sectors; digital economy and Digital China initiatives may fall short of expectations; cloud computing business progress among telecom operators may be below expectations; operator capex may fall short of predictions; cloud vendor capex may be weaker than expected; demand for communication modules and smart controller sectors may also lag expectations.